The Revenue Recognition Principle Requires

The revenue recognition principle states that revenues should be recognized or recorded when they are earned regardless of when cash is received.

The revenue recognition principle requires. It means that revenues or income should be recognized when the services or products are provided to customers regardless of when the payment takes place. The revenue recognition principle a feature of accrual accounting requires that revenues are recognized on the income statement in the period when realized and earned not necessarily when cash. The revenue recognition principle is an accounting principle that requires revenue to be recorded only when it is earned. Revenue recognition is an accounting principle that outlines the specific conditions under which revenue sales revenue sales revenue is the income received by a company from its sales of goods or the provision of services.

According to the principle revenues are recognized when they are realized or realizable and are earned usually when goods are transferred or services rendered no matter when cash is received. To summarize the above discussion we can say that the revenue is recognized when the entity is entitled to it i e earned provided that it is recoverable i e realized or realizable not at the time. The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle they both determine the accounting period in which revenues and expenses are recognized. Revenue should be recorded when the business has earned the revenue.

None of these answer choices are correct. Revenue recognition principle requires that the revenue must be realized or realizable in order to recognize it in the accounting records. When the merchandise is ordered. The matching principle states that expenses should be matched with the revenues they help to generate.

In other words companies shouldn t wait until revenue is actually collected to record it in their books. When cash is received. The revenue recognition principle requires that sales revenues be recognized. Here are some additional guidelines that need to be followed in regards to the revenue recognition principle.

In accounting the terms sales and revenue can be and often are used interchangeably to mean the same thing.